Do crypto banks already exist?

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This week, I just started to notice some crypto companies resembling banks. While most of the crypto community prefers to "take control of their money" and "hold their own key" it is fair to say that a large percentage of holders or better, hodlers are looking for ways to yield some returns on their investments. In addition, many people just arriving in the Crypto realm are more inclined to use custodial services. With that need in mind, few crypto companies have emerged and few exchanges are adjusting their business plans to fill this increasing demand. To be competitive in addition to holding the crypto, these services are now offering interest on crypto deposits.

Recently Coinbase announced that it will start to offer return on  certain coins. The first announcement was the stable coin USD Coin. According to Coinbase recent tweet:  "All eligible US customers will earn 1.25% APY rewards on every USD Coin held on Coinbase." An interesting move that can certainly drive interest from users as those returns are often much higher than returns offered by major national banks.

And Coinbase is not alone, there are other players that have been in the market for a while such a Celsius . According to the CEO, Alex Mashinsky, the company has been growing a customer base for the passed two years. And today they are the number two crypto asset holder in the market, just under Greyscale with total assets under management valued at $400 million. One of their most recent client acquisition is the Litecoin Foundation.

Both Coinbase and Celsius are fully regulated and require a KYC process in order to qualify for interest earnings. However unlike banks they are not insured by the FDC. At the moment Coinbase offers 1.25%APY on USD Coin and Stable coin. Celsius offers a broader range of coins and higher returns than Coinbase. Some of the coins that can be deposited into their platform are Bitcoin yielding today 4.65% APY, Litecoin yielding today 4.50%APY, Gemini dollar stable coin yielding today 8.20%APY among others. Yields vary on a daily basis.

The concept behind this business plan is very similar to what banks have managed to do for years. These companies are able to yield returns by lending the deposits to third parties. These loans are charged interest that is then used to generate profits for the companies, their shareholders and clients. As noted by Alex Mashimo, CEO of Celsius in an interview with Mark Moss: Celcius goes a step above by returning 80% of those profits back to the user, while banks use that to pay their shareholders. With that he claims he is able to generate users, his clients, higher returns.

In conclusion I think that offering an option that competes with current bank rates is healthy for the environment and can certainly drive attention from the general public. People are looking for good rates of return as well as better interest rates when borrowing as well. Celsius does offer that option and more competitive rates than the bank. However in this scenario it is very important to remind that the user does not hold their own keys. There is no full guarantee that their funds are completely safe in an eventuality.

On the other hand with banks at this point, even fully regulated and insured, deposits are yielding almost nothing to negative interests rates in many parts of the world so hard to imagine that many people are choosing to maintain their savings in their current accounts. Many of us are wondering what to do next, and that includes me.

Super Disclaimer: This Article is NOT investment Advice. It is important to do your own research before investing in crypto currencies or depositing any funds into these platforms. Be fully aware of the risks. I am simply mentioning a service that I recently noticed and used for very short time. I am still learning as well so if you have any comments or anything to add to the topic please make sure to leave a comment. Would love to hear some personal experiences from people that used the Celsius Platform for a a while. Thank you.

All my best,

MamaeCrypto

By: Michelle Mafra (MamãeCrypto)

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